Is it realistic to aim for a million pounds by regularly investing money in the stock market? Well, evidence proves that it is because in August it was revealed that there were more than 4,000 ISA millionaires in the UK.
Of course, we don’t know exactly what type of investments they held in their accounts. But it’s believed that nearly all these millionaires are investing in a Stocks and Shares ISA. That’s hardly surprising given that stocks have outperformed all other asset classes over the long term.
I think keeping things simple is the way to go in 2024. In fact, if I were starting out, I’d invest in the shares of just 10 profitable and great companies.
Rome wasn’t built in a day
To realistically aim for a million, I’m going to have to take the Foolish long-term view when it comes to investing.
The Latin root for the word ‘invest’ is investere. It means to put on the clothes or to dress oneself in the clothes of something. The Motley Fool co-founder David Gardner likens this to a sports fan who wears the shirt of their favourite team. They’re invested in the team’s success and cheer it on.
Similarly, as a long-term investor, I own a small part of the businesses that I put my money behind. So I should be rooting for the companies that I’m invested in. And that means not swapping teams every week (or quarter).
Choosing world-class businesses
To my mind, one of the strongest companies of our time is Google parent Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL). It has multiple businesses, including its core search and cloud operations. But it also owns YouTube. All of these units have huge growth prospects.
However, Alphabet also owns DeepMind, the British-American artificial intelligence research laboratory. Oh, and Fitbit (fitness products), Nest (smart home products), and self-driving car firm Waymo.
Did I mention the Android operating system? It owns that too.
That’s an incredible level of optionality, which is just a fancy way of saying the firm has many ways to keep winning.
However, that doesn’t mean it doesn’t face heavyweight competition. It does, notably in the shape of Microsoft, presenting long-term risk.
But Alphabet shares are currently trading on a forward-looking P/E ratio of just 19, using 2024’s forecast earnings. I think that’s cheap for such a company.
Getting to a million?
Alphabet doesn’t pay a dividend yet. But regular cash payments would play an important part in my million-pound portfolio drive. So I’d target dividend stocks too.
One I like is Legal & General. It generates plenty of cash, has a strong balance sheet and a tremendous long-term dividend record.
Yet the stock has struggled lately as interest rates have risen and impacted the value of the firm’s existing fixed-income investments. This presents challenges for the company, but I think the 8.8% dividend yield on offer makes the risk worth taking.
Finally, I’d reinvest my dividends rather than spend them. This way, my returns would start to be supercharged by the power of compound interest.
If I invest £1,000 into my ISA each month and achieved a compound annual growth rate of 10%, I’d be a millionaire after just 24 years. With a lower 8% return, it would take me 27 years.
